While respondents presciently predicted that geopolitics would be the main challenge for investment in 2025, confidence nevertheless continues to build in the European hotel market, with the vast majority (90%) of investors looking to maintain or increase capital allocation in the sector.

The sector offers competitive yields and according to the research, respondents cited optimistic total return prospects, and relative outperformance against other asset classes as key reasons to increase their allocation to hotels.

Spain remains the top investment destination for the second consecutive year, supported by long-term market fundamentals and sustained tourism demand. Italy surpassed the UK to take second place.

The growing interest in Italy’s hospitality sector is widespread, buoyed by the countries diverse hospitality offering and a new cohort of international-class hotels emerging. The UK and Portugal took joint third place, while France and Greece retain fourth and fifth place.

At the city level, London remains the leading investment choice. Madrid further solidified its status as the second most attractive city for hotel investment, with Rome rounding off the top three cities, up from fourth last year. Lisbon and Barcelona complete the top five.

“The ongoing supply and demand imbalance across Europe continues to be a key driver for the sector,” said Kenneth Hatton, CBRE’s Head of European Hotels.

“We’re seeing strong bids from prospective buyers looking to acquire the best assets, reflected in last year’s hotel investment volumes which were up 34% from 2023, the largest year-on-year increase for any sector in the region.”

Investors continue to target urban product. 65% of respondents consider CBD and gateway cities the most appealing location, affirming their status as long-term demand hubs that are supported by resilient business and leisure travel.

Secondary cities have gained traction and according to CBRE’s research, 12% of respondents said they are the most attractive investment opportunities, driven by growing confidence in emerging tourism markets that are supported by improved infrastructure and shifting travel patterns.

When asked which strategy was preferred for deploying capital, two-thirds of investors said they favour value-add strategies. This reflects a marked increase from 51% in last year’s survey, suggesting that expectations of finding opportunistic returns in distressed situations have diminished, while at the same time there still being a belief that the European industry can benefit from re-positioning and operational improvements to drive total returns.”

'Investors can still see opportunities in the great professionalisation of the European hotel sector, where capex, operational improvements and roll-out strategies hold out the prospects for very attractive total returns, especially when considered in the context of the projected supply/demand dynamics.' - Kenneth Hatton, Head of European Hotels

'Europe was the most visited region by inbound travellers across the globe last year, and is a market characterised by a diverse range of destinations, whether that be vibrant city centres or idyllic coastal towns. The luxury subsegment in particular has been a bright spark, demonstrating its pricing power through impressive average daily rate growth and we believe opportunities still exist for those looking to enter the market.; - Ronald Chan, European Hotels Research Lead

*CBRE’s 2025 European Hotel Investor Intentions Survey was conducted in Q4 2024 and canvassed the views of 110 investors made up of hotel owners and developers, private equity, institutional investors, private investors and real estate funds, with responsibility for AUM from below $250m to above $5bn globally.

Charlotte Kenna, Director, External Communications & PR

charlotte.kenna@cbre.com